Like a massive tidal wave, EMV continues to roll across the world, changing the global payments landscape. Since UK banks first committed to EMV five-years ago, more than 100 countries have taken the plunge in efforts to stem credit card fraud.
But the U.S. has always remained outside the EMV plan. This, however, may be changing as fraud, technology and business is changing the payments landscape.
Brian Byrne, head of product technology for standards and specifications at Visa estimates there are some 730 million EMV cards and 10 million terminals in existence around the world.
Toni Merschen, group head of chip at MasterCard Worldwide, notes that the Single European Payments Area initiative requires 38 countries to complete the migration to EMV by Jan. 1, 2011.
EMV gets its name from the companies which originally created it, Europay, MasterCard and Visa. Seven years ago Europay merged with MasterCard and the new standards body was renamed EMVCo. Its members now include Visa, MasterCard, Japan-based JCB and its newest member, American Express.
EMVCo's primary goal "is to facilitate global interoperability and compatibility of chip-based payment cards and acceptance devices through deployment of relevant EMV Specifications," says an EMVCo spokesperson.
EMV also goes by "chip and PIN," because the card contains a chip and a PIN is required before a transaction is processed. But nowadays, that chip and PIN moniker may be misleading. As Byrne, points out, many countries are foregoing the PIN part of EMV implementation, the predominant reason being that many consumers don't want to remember a PIN.
The country most advanced towards EMV implementation is the UK, the banks their were the first to adopt chip and PIN, says Merschen. Other markets that have reached maturity for EMV migration on either cards, point-of-sales devices and ATMs include France and Turkey in Europe and Malaysia in the Asia-Pacific region, he adds.
The migration isn't easy. Merschen says a number of infrastructure changes are required to handle EMV. "For issuers, there are new data elements that need to be supported by the issuer authorization and clearing host systems. Card data preparation, including key management, and card personalization also require hardware and software upgrades," Merschen says. "On the acquiring side, the impacts are similar. Acquirer host systems must be able to receive new data fields from terminals, which also need to be upgraded from both a hardware and software perspective."
Glitches all but resolved
In the early days of EMV there were issues, Merschen says, such as a shortage of approved products, lack of customer and vendor expertise with EMV and areas where the specifications left implementation options.
That was then. These issues from the early days of EMV have largely been resolved, says Merschen. "Robust migration processes are available to guide the banks, merchant, and consumers in their migration involvement," he adds.
Visa's Byrne describes the early road bumps as minor. "This card issued in country A was having some acceptance problems in country B. In some cases, some of the older terminals wouldn't work properly, but that was usually due to configuration issues, fairly minor stuff."
EMV in the U.S.?
So with the U.S. sandwiched between two EMV countries-Mexico and Canada-most think it's only a matter of time before the U.S. joins the EMV parade.
Paul Beverly, president of Gemalto North America, believes increased fraud will mandate such changes.
In an article in the spring 2009 issue of Regarding ID magazine, Beverly wrote: "The rest of the world is well on the way to EMV implementation. Europe and Asia have long been issuing cards and ... Latin America, faced with exploding credit card skimming fraud, is fully committed to EMV smart cards. .. Yet stakeholders in the United States still find fraud losses and identity theft risks acceptable. It is disappointing that U.S. companies are trailing the rest of the world in this area."
Charles Walton, executive vice president for payments for INSIDE Contactless, believes that the U.S. will ultimately get on board with the secure cards. "We're seeing inherent insecurities in the system, such as the Heartland Payment Systems hack. It's only a matter of time before these types of hacks will become intolerable."
Walton says hackers will look at the weakest point in the payment chain and exploit it. "If you start securing one point in the chain, it begins to expose the other points, the path of least resistance for water, will find the lowest point."
MasterCard's Merschen says that these fraud migration and data compromise incidents, plus the possibility of government regulation will lead several U.S. banks to consider EMV.
The handwriting is on the wall, so to speak. "It's inevitable that the U.S. migrate to EMV, primarily because fraud is escalating," adds Randy Vanderhoof, executive director of the Smart Card Alliance. "Major financial institutions in the U.S. are also international so it will not be a big step for them to issue these cards in the U.S."
Contactless and EMV
At first blush it would seem that contactless and EMV would be working toward opposite purposes, but Walton says EMV can run on top of contactless. "I would think of EMV as a security protocol that works with contactless as well as contact chips."
Visa is using EMV specs in its contactless payWave technology, Byrne says. "The way we're deploying contactless in the U.S. is using EMV specs," says Byrne. "It's based on EMV technology making use of strong security elements baked into EMV. These new cards will not only be accepted in readers in the U.S. but also in the UK."
The next generation of contactless cards will be a step toward EMV, says Vanderhoof. For example, MasterCard terminals certified for contactless also carry elemental portions of EMV. "We're seeing these gradual upgrades of the infrastructure to support it," he says.
Vanderhoof says these new rules for EMV contactless are different than those for EMV contact cards. Purchases under about $25 can be a contactless transaction in the UK, just like in the U.S. "Just tap it and go, no PIN or signature. After a certain number of transactions you might be required to enter your PIN."
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